A suitor for SVB soothes broader markets, but default stress stalks banks

March 27 (Reuters) – A potential buyer for Silicon Valley Bank helped give a fragile market Monday some uneasy calm.

First Citizens BancShares Inc (FCNCA.O) was in talks to buy SVB (SIVB.O) from the Federal Deposit Insurance Corporation, a person familiar with the matter told Reuters. Headquartered in North Carolina, First Citizens has approximately $109 billion in assets and $89.4 billion in total deposits.

Bloomberg News, which first reported the development, said a deal could be reached soon.

It was the first weekend in weeks without news of new bank failures, bailout deals and emergency help from authorities to boost confidence, giving markets some respite.

“It’s good to have buyers,” said Tony Sycamore, an analyst at IG Markets in Sydney, who said the weekend ended without any new incidents, but without details on prices, the European trade opening could be delayed. There was little to stick to before.

“It’s calming down a bit before the next storm.”

Indicators of stress in financial markets flashed last week, ending Germany’s biggest lender Deutsche Bank (DBKGn.DE) in the crosshairs, with shares falling 8.5% Friday and bond insurance premiums against default has risen sharply.

Asian bank stocks were mixed on Monday, with Australia (.AXFJ) and Tokyo (.IBNKS.T) holding steady while Hong Kong (.HSCIF) fell as Standard Chartered shares fell 3.5%.

S&P 500 futures were up 0.5% and European futures were up 1.1%.

The collapse of SVB a little over two weeks ago resonated around the world, with US depositors fleeing smaller banks for their larger cousins, and a blow to confidence that saw Credit Suisse close out of rival UBS last week. fell into my hands.

With the Stox index (.SX7P) of European bank stocks down more than 18% and the US KBW regional bank index (.KRX) down 21% in March, investors are nervous about what’s next.

“It’s clearly not over,” Australia and New Zealand Banking Group chief executive Shane Elliott said in an interview on the bank’s website, adding that the turmoil could escalate into a bigger financial crisis. said there is.

“I don’t think you can sit here and say, ‘Silicon Valley Bank and Credit Suisse are all over and life will be back to normal,'” Elliott said. “These things tend to go on over a long period of time.”

carrot, stick, acronym

The sudden rise in tensions between banks has raised questions about whether major central banks will continue to aggressively raise interest rates to keep inflation in check and whether tightening lending will hurt the global economy.

In Europe, bank bonds are under pressure, and the cost of credit default swaps, or insurance against defaults, is worryingly high. Deutsche Bank’s 5-year CDS hit its highest level since late 2018 on Friday, according to data from S&P Global Market Intelligence.

Depositor confidence in local lenders comes into focus as US money market fund inflows rise by more than $300 billion in the past month to a record $5.1 trillion .

The FDIC has been trying to sell Silicon Valley Bank’s assets for several weeks and has been asking for separate offers after failing to sell SVB Private and SVB together.

The FDIC did not immediately respond to Reuters’ request for comment. So are SVB and First Citizens. No details or price were available, but the deal may signal weak confidence in the sector.

“In effect, you can combine carrots, sticks and acronyms to ensure you get the results you want and allow (the authorities) to use interest rates to combat inflation,” said Michael Every, a strategist at Rabobank. Stated.

“This seems to be part of it.”

Additional reporting by Maria Ponnezhath, Bangalore and Tom Westbrook, Singapore. By Tom Westbrook.Edited by Jacqueline Wong

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